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Capitalism Law and Legal Definition

Capitalism is an economic system in which the means of production and
distribution are privately or corporately owned and development is proportionate
to the accumulation and reinvestment of profits gained in a free market.
In a capitalist economy, personal profit can be acquired through investment
of capital and employment of labor. The concept of free enterprise is the
cornerstone of capitalism, which believes that the laws of supply and demand
with minimal government intervention is will ultimately maximize consumer
welfare.

However, capitalism has required government intervention to curb its
abuses, which have ranged from slavery to monopoly cartels and financial
fraud, and government assistance through subsidies, tax credits, incentives,
and other types of exemptions. Capitalism and the free enterprise principles
behind it are in contrast to other economies, such as those in Germany
and Japan, which incorporates private production within centrally planned
industrial policies in which bankers, industrialists, and labor unions
meet and seek to agree to wage policies and interest rates. The collapse
of the Soviet Union and its satellite states in Eastern Europe (1989-91)
represented a substantial retreat in the power of the socialist economic
system. China's communist economy has also recently seen influences of
capitalism.